The Company has acquired significant land positions in two project areas and plans to be able to initiate drilling operations in Q4 2009. Follow-on and development drilling programs are set to begin after thoroughly testing the primary target zones in each wellbore on its prospective properties. Wells will be tied in and put on production as soon as market access can be acquired and flowlines lay to tie in points. 

OIL PROSPECT – NEW MEXICO

Management has selected this project based on its potential for immediate production of oil from relatively shallow wells. Two giant oil fields lie within the target trend and have produced over 2.2 billion barrels of oil.

San Andres Carbonates
Northwest Shelf of the Permian Basin
Northeast New Mexico

The San Andres, a carbonate sequence of Permian Age, is one of the most prolific oil producing horizons of North America. Deposited as an overall regressive sequence, underlain by high-energy transgressive sands and overlain by evaporates. The San Andres oil traps are formed where porous dolomites, capped by evaporates, grade up dip and laterally into nonporous limestones. The depositional model appears to occur where subtle topography led to the development of intertidal carbonate mudflats. Laterally the mudflats were dissected by tidal channels, where later lithification of the channel deposits resulted in formation of limestones and diagenesis led to dolomitization and reservoir development of the carbonate mudflats.

There are three major porosity cycles developed within the San Andres. Each cycle represents a separate transgressive event and each event is characterized by a lower shale sequence overlain by carbonates and grading into evaporites.

The youngest porosity cycle is developed along an 80-mile stretch in an east to west direction, from the Texas - New Mexico border to the Pecos River of New Mexico. Over 2.2 billion barrels of oil have been produced from this cycle from depths less than 5,500’. Two giant oil fields lie within this trend; the Wasson and the Slaughter-Levelland.

The oldest porosity cycle is represented in the east to west trending asphalt pit near the town of Santa Rosa, New Mexico. Estimated to have contained 90 million barrels of oil in place (New Mexico Bureau of Mines), this trap was breached during the Tertiary Period and now is exposed at the surface.

Morgan Creek’s Frio Draw Prospect focuses on the middle porosity cycle. Detailed log analyses on over 100 wells penetrating this cycle have delineated areas where there is a noted increase in porosity and permeability. Within this trend, the majority of analyzed wells demonstrated oil and gas shows. No commercial production has ever been attempted. Morgan Creek’s depositional - diagenetic modeling, based on Shell Oil’s stratigraphic testing of this porosity cycle in the mid 1960s, has defined several prospective productive areas.

Morgan Creek’s leased block currently sits at approximately 13,250 acres. Drilling to the target depth poses no serious operational. Overall drilling, completion and equipping base costs, projected at $675,000 per well. The initial target location has been selected.

DRILLING INITIATIVE

Morgan Creek Energy intends to begin drilling the first test well in the Frio Draw Prospect by year-end 2009. The Company is preparing the required administrative and logistics work to ensure the immediate kick-off of drilling operations.

ECONOMICS 

 OIL PROSPECT – OKLAHOMA

Management has selected this project based on its potential for immediate production of oil from relatively shallow wells. This represents a development project for Morgan Creek Energy.

Morrow A & B Sands
Oklahoma Panhandle
Southern Oklahoma

The North Fork 3-D Prospect is located in Southern Beaver County, Oklahoma between the Prolific Booker area located to the south (adjoining our Lease) in the Panhandle of Texas and the Elwood Morrow field located two miles to the northwest of our lease line. Bonanza has shot a multi-component 3-D survey on approximately 8,500 acres to image the Morrow A & B Channel Sands that are productive in the adjoining Booker and Elmwood fields.

The primary target formation is the Upper Morrow A Channel, which produces to the south and northwest of our acreage. This Channel is part of a fluvial system that runs from southwest Kansas through Oklahoma to the Texas Panhandle. Three pairs of these A & B Channel Sans area contained in a broad valley that runs Booker through the Oklahoma Panhandle. Sands in this system are 100% productive of hydrocarbons in Texas and 95% productive in the Oklahoma Panhandle. Typically the Morrow A & B Channels have porosities in excess of 20%, high permeability, high production rates and very high acre foot recoveries. Morrow A sands in the immediate area are primarily oil productive with initial production rates from 250 – 600 BOPD. Primary reserves for the oil wells in the area average 200,000 B.O. per well. Reserves for the Morrow A on the Prospect could be in excess of 2.4 million barrels of oil with 4 BCF of associated gas.

Morrow C sands are productive immediately to the north, east and south of our acreage. These sands are part of a large delta complex and will likely be present on our acreage. Average recoveries for the Morrow C in the immediate area are in excess of 250,000 B.O. per well.

Lower Morrow is productive immediately to the east of the prospect and will provide a back up zone. Lower Morrow has recoverable reserves of up to 150,000 B.O. and 1 BCFG in the surrounding area. Many of the wells in the area did not drill deep enough to penetrate the Lower Morrow.

The Chester Lime is located below the Lower Morrow and is productive in the area. The Chester could add reserves of 25,000 B.O. and 0.5 BCFG per well. While these reserves are too low to be a primary target, they do provide a potential bail out zone.

DRILLING INITIATIVE

Morgan Creek Energy intends to begin drilling the first test well in the North Fork 3–D Prospect by year-end 2009. The Company is preparing the required administrative and logistics work to commence drilling operations.

ECONOMICS